Inflation bites at growth

Manufacturers and exporters are facing rising material costs

During the first quarter, the consumer price index soared by 9.19 per cent over December and 16.38 per cent against March 2007. “Economic growth is still high but we have seen a signal of the slow down due to inflation and the recession in the global economy,” said Cao Viet Sinh, Vice Minister of Planning and Investment.
The industry and construction sectors increased by 8.15 per cent, while the service sector was up 8.05 per cent and agriculture, fisheries and forestry sectors were up a combined 2.86 per cent.

“The figures look good. But, the economy is experiencing a difficult period. Domestic manufacturers and exporters are facing rising material costs and high lending rates from commercial banks,” said Dinh Van An, director of Central Institute for Economic Management. Sinh said the economymust grow 9.3 to 9.4 per cent over the three remaining quarters in order to reach the targeted 9 per cent growth for this year.

“This target is very high, while the economy is facing a lot of difficulties,” said Sinh. Industrial growth is also on the wane. An MPI report showed that industrial growth was down to 16.1 per cent in February from 18.1 per cent in January.

“Apart from rising fuel and material costs, the weak competitiveness and ineffectiveness of domestic enterprises, especially large state- owned enterprises, are the main factors causing the slow down of industrial growth,” said the report.

Export turnover has grown to $13 billion, an increase of 22.7 per cent against the first quarter of 2007.
However, the trade deficit is widening to a gaping chasm, reaching $7.36 billion over the past three months, a three-fold surge over the same period last year.

Meanwhile, the growth of export turnover was mainly driven by high prices in the international market and not from export volume.

If high prices are excluded, export turnover increased by only 11 per cent, said the report.